NW/CO/DL issued a joint news release today saying they intend to implement their marketing/codeshare agreement, but will not abide by some the conditions the DOT wants to impose (not the DOJ, but the DOT). As you'll read below, NW/CO/DL are saying:

- The DOT didn't impose similar condition on the UA/US agreement
- The DOJ has approved it without imposing these conditions
- We'll agree to some self-imposed conditions (see below)
- If DOT wants to sue us, go right ahead

I think this will be fun to watch. I hope they give a timetable for implementation soon. The flexibility to earn OnePass miles on Delta will be nice.

“We have decided to move forward with implementation of our marketing agreement at the earliest possible date. As planned, the three airlines will soon offer reciprocal frequent flyer and airport lounge benefits to consumers, and will begin codesharing as soon as practicable.

“In recent days, we reached agreement with the U.S. Department of Justice on conditions related to our marketing agreement, and we were prepared to accept most of the additional conditions that DOT sought to impose on us. However, some of DOT’s conditions are unacceptable, and we will not agree to them.

“A similar marketing agreement between Continental and Northwest has lowered prices, increased service levels and brought as much as $1.5 billion of annual benefits to consumers since it started in 1998. The marketing agreement among Continental, Delta and Northwest will bring similar consumer benefits, including:

Seamless service to thousands of new markets

Frequent flyer reciprocity, so customers can earn their favorite frequent flyer miles whether they fly Continental, Delta or Northwest

Access to each carrier’s private airport lounges

Increased frequency of flights, and better time of day coverage for travelers

Broader availability of low-priced seat inventory
“Our marketing agreement preserves competition among Continental, Delta and Northwest, since each carrier will continue to independently price, schedule and make all other competitive determinations. The U.S. Department of Justice, the government agency with the principal responsibility and expertise in enforcement of U.S. competition laws, last Friday approved our marketing agreement, subject to conditions agreed to by the carriers with the Justice Department, stating, ‘This alliance agreement, as conditioned, has the potential to lower fares and improve service for passengers in many markets throughout the country.’ The Justice Department concluded that no other conditions were necessary to protect competition or to realize the consumer benefits of the carriers’ marketing agreement. According to the Justice Department’s statement: ‘The alliance can benefit consumers by offering codeshare service to new cities, increasing frequencies or improving connections to cities already served by the carriers, and by permitting frequent flyers to earn and redeem their miles on any participating carrier. Corporations can also benefit from joint bids for contracts from alliance airlines where the airline partners offer complementary rather than competing service.’
“Moreover, the DOT recently permitted a virtually identical marketing arrangement between United Air Lines, the world’s second largest airline, and US Airways to proceed without any conditions imposed by the DOT.

“While the three airlines were prepared to accept most of DOT’s proposed conditions, there are several conditions that are not acceptable. In particular:

Confiscation of ‘underutilized’ gates – the DOT’s proposed requirement that the airlines surrender gates at their hub airports that do not satisfy an arbitrary ‘utilization’ test created by DOT is unacceptable because it is completely unrelated to the marketing agreement, labels normal gate utilization as ‘under-utilized,’ will put at risk the core assets on which the airlines depend to operate their hub-and-spoke networks, raises complex questions about airport financing arrangements, and jeopardizes the ability of the airlines to continue to serve the full scope of communities they now serve.

Limitations on the scope of codesharing – while the airlines are willing to adhere to numeric limitations on the scope of codesharing during the first year phase-in of service, the potentially permanent limitation contemplated by the DOT is unacceptable as it would severely restrict the availability of codeshare benefits to millions of passengers and arbitrarily deprive the airlines of the much-needed economic benefit of the marketing agreement.

Limitations on joint contracts – the proposed restrictions on joint contracts with corporate customers is unacceptable, as it will arbitrarily and severely deprive corporate customers and travel agents of the advantages of the airlines’ expanded codeshare services. It would also arbitrarily and unfairly leave the airlines unable to compete effectively for corporate customer and travel agency business.
“These proposed DOT conditions would undermine the value of the marketing agreement to consumers, and, therefore, to the participating airlines.
“Although the carriers will not agree to certain of the conditions that DOT seeks to impose, Continental, Delta and Northwest have committed nonetheless to:

Release to local airport authorities a total of 13 gates at four of the carriers’ hub airports that become surplus as a result of the carriers relocating their gates in order to make connections between the carriers more convenient for travelers, and offer to release in the future any gates at their hub airports or at Boston that become surplus as a result of similar airport gate relocations related to the marketing agreement

Restrict for a one-year period the total number of new domestic, Canadian and Caribbean codeshare flights between Northwest and Delta and between Continental and Delta to 650 flights per two carrier codeshare (for a total of 2,600 flights), and specify that at least 391 of each marketing carrier’s new codeshare flights (a total of 1,564 flights) must be to or from underserved or small airports, with a provision to notify the DOT if the carriers desire in the future to increase the number of those new codeshare flights

Restrict three-carrier joint bids for corporate or travel agency contracts to those companies that request them; prohibit joint bids to companies headquartered or with a principal place of business in a carrier’s hub city or other cities for domestic service originating from that city if the combined market share of the three carriers exceeds 50 percent at that city, and restrict the content of joint bids unless otherwise requested by the company or in a good faith response to a competitive bid.
“None of these additional commitments was required by the Department of Justice when it approved the carriers’ marketing agreement last Friday, nor were similar conditions imposed by DOT when it approved a virtually identical agreement between United Air Lines and US Airways. None of these additional commitments is necessary to preserve competition as part of the carriers’ marketing agreement, which is designed to maintain the competitive independence of each of Continental, Delta and Northwest. Nonetheless, each carrier has made these commitments during the pendency of any enforcement proceeding brought by DOT.
“Now that DOT’s regulatory review period has terminated, Continental, Delta and Northwest intend to move forward with implementation of their alliance (subject to the commitments outlined above).

“Our marketing agreement fully complies with applicable law. Should DOT bring an enforcement action regarding the marketing agreement, the carriers intend to defend their marketing agreement vigorously while continuing to implement it, in order to protect the pro-competitive, pro-consumer benefits identified by the Justice Department, and to prevent the DOT from placing Continental, Delta and Northwest at a competitive disadvantage during a time of unprecedented crisis in the airline industry.”

Attached to this press release is a letter from the three carriers to the Department of Transportation dated Jan. 21, 2003.

Great!! Keep it up for more news for me into the a.net. When will be began for the codeshare into Spring 2003? Can you please let us know find out exact want to know more news for codeshare beginning into DL/NW/CO into skyteam alliances. Please let us know! Thanks!

Good news! I too, thought that the DOT overstepped its boundaries here, as 650 flights is not that many for each of these airlines, who operate at least 3000 flights daily. While I do think that consolidating gates is good, I don't think the DOT should force these airlines to give up a gate. Once again, it is government getting involved in the private sector; I guess that's what happens when you have a democrat running the DOT (yes, President Bush did put a democrat in at the DOT).

Doug: Norman Mineta was the Secretary of Energy (IIRC) under Clinton, but Bush appointed him to be Sec. of Transportation. He is currently the only democrat in the Bush cabinet.

I must keep the idea that the DOJ should be in charge here on anti-competitive portions. While the DOT may make suggestions, the role of the Attorney General is to watch out for anticompetitive behaviour.

Man, This is awesome for codeshare will be began into summer 2003. This is wonderful to hear for the DL/NW/CO. I will able use more with my Skymiles into Delta fly on codeshare with NW/CO someday for myself. Someday that I will flew to DTW for connecting into new terminal soon. Well, talk ya later!

The legal haggling over the conditions of the DL/CO/NW alliance is merely chasing after a horse that's out of the barn. Neither the UA/US nor the DL/CO/NW alliance should have been approved by DOJ at all. The six Cartel-network carriers should *not* be allowed to concentrate any more market power. It's well known that they still want to consolidate, which would be a disaster for consumers and communities. DOJ needs to send a firm message: let the marketplace and financial community sort out which Cartel carriers survive. The market, even with post 9/11 conditions, will support more network carriers than the network carriers want there to be.

But DOJ gave DL/CO/NW an inch, so they're taking a foot. Both alliances should be canned by the Feds immediately, but of course they won't be. At this point, all DOT can do is sue for enforcement of the conditions and appeal for DOJ assistance. If DL/CO/NW go head as they plan, if they lose the case they should be sanctioned. The Federal government has the legal right and obligation to protect competition, and both of these alliances are anticompetitive.

Any wrangling over conditions for the DL/CO/NW alliance is simply chasing after a horse that's out of the barn. DOJ should not have approved either the UA/US alliance or this one. The Cartel-network carriers should not be allowed to concentrate any more market power, regardless of their financial condition. They want to consolidate down to fewer airlines than the market can support, in order to better gouge uppity communities that now have choices. These alliances are a way to smooth the slope into that pit.

Nevertheless, DOT ought to sue; a rear-guard action is better than none. If they win, they ought to sanction DL, CO, and NW vigorously.

Nevertheless, DOT ought to sue; a rear-guard action is better than none. If they win, they ought to sanction DL, CO, and NW vigorously.

Many of the media are reporting that the DOT may just do nothing on this issue.... but rather wait and give all three airlines the finger once they apply to codeshare internationally (which, if denied... would make this cooperation utterly useless for myself, and I'd imagine many others)

Sorry about the double post...my computer told me it ate the first one, so I wrote the second from scratch. Sometimes the machine does that--says it didn't get through to a website, and then did. Weird.

Reuters just reported that DOT will take DL/ CO/ NW to court to enforce the conditions.

Nevertheless, DOT ought to sue; a rear-guard action is better than none. If they win, they ought to sanction DL, CO, and NW vigorously.

Enough already! I still fail to see the rationale of quasiregulation of the aviation industry. This alliance is not anti-competitive or anti-consumer. In fact, it could be argued that these sorts of alliances are exactly what large network carriers SHOULD be doing to save themselves, the jobs of their employees, the economies of their hub/focus cities, and air service to smaller communities.

The alliance will give Delta, Northwest, and Continental far greater latitude to provide some service to more people, rather than reducing service all around and potentially dropping some cities from mainline -- or even regional -- service altogether.

A particular market must make itself attractive to the airlines to get service. As the three airlines plan together, the criteria that a market must meet to be 'attractive' is suddenly less burdensome. Granted, there may only be service on a single carrier, but if that's what the market bears, so be it.

And, if a city really is fed up with their airline options, they can always put together a travel bank and go shopping. It's done all the time nowadays, and there's no shame in it.

The government's role is not to nitpick businesses into quasiregulation, as others here have suggested. Let each market be a true market -- otherwise, what's the point? Why be in business if you're just going to have to succumb to governmental paranoia and micromanagement? If the government wants to manage an airline... let it start one itself.

"...UA/US will try to do disregard the restrictions put on their alliance as well."

Good point Usairways85. What's good for the goose and all that.

Actually, this fight is happening much faster than I thought it would. I posted on an earlier NW/DL/CO thread that they would start out slowly and then jump the restrictions. I guess things for NWA, DAL and COA are much worse than I imagined. No time to lose is the new industry slogan. Reminds me of that old Monty Python sketch.

I find it funny how employees at the three think that this alliance will save jobs. There will be a great loss of jobs as these three intend to streamline their operations. Why else would they spit in the face of the DOT? With over 3200 overlapping routes it is easy to see that capacity and job cuts are on the horizon.

The government's role is not to nitpick businesses into quasiregulation, as others here have suggested. Let each market be a true market -- otherwise, what's the point? Why be in business if you're just going to have to succumb to governmental paranoia and micromanagement? If the government wants to manage an airline... let it start one itself.

Trouble is, air travel is a public good....it is too vital to the economies of too many places to be left entirely to the whims of airline executives who don't give a rat's tail about the communities they serve. History indicates without question that whenever the high-cost Cartel-network carriers are allowed to concentrate power, they use it to destroy and gouge.

This is not opinion or speculation. It is fact backed by the experience of many fast-emptied wallets and corporate travel budgets. And many abandoned communities. Without public pressure and observation, only the highest-yield destinations and passengers would get service. Southwest can't reach smaller cities. That means enough network carriers and their regional affiliates, strong in different regions, and not big enough to destroy low-fare carriers.

These alliances are simply a backdoor way to move towards what the network carriers are salivating for, and what Congress and DOJ and DOT should fight to the last man...consolidation. That would mean three network carriers when the dust settles. The US economy can support four or five network carriers if they are properly managed. Saving service to smaller cities, and airline jobs, requires making the airlines act like businesses and compete, instead of allying, and ultimately buying each other out and divvying up the country for sky-high fares.

Medium-size cities in particular have NOT forgotten the 1990's, and we aren't going to forget anytime soon.

Yes it is, because if DL/CO/NW can successfully disregard their restrictions then what is stopping UA/US to disregard the restrictions put on them, regardless whether the restrictions are even close to being the same.